Not sure how to handle your IRS or OTC Tax Liability Problem? Get the answers you need to protect your rights!

Attorney Travis Watkins has compiled a list of the most frequently asked questions in response to the overwhelming number of people who are facing tax liens, wage garnishment and other penalties for unpaid taxes. If you are dealing with an insurmountable tax debt, read on to learn how to protect your legal rights.

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  • Seeing as how most of my problems (financial) are tax problems, would it make more sense to hire a tax attorney or do you think that a bankruptcy attorney would be able to handle my situation and file a CH 7 (assuming they know the laws required to discharge federal taxes in bankruptcy) ??

    The only reason to hire a bankruptcy attorney first is if you have a bunch of non-tax debt (especially judgments and imminent collection such as garnishment) that compels you to file an immediate bankruptcy and get a bankruptcy stay in place.  Do what you have to do to keep creditors off your back.
     
     
    However, if the majority of the debt you are trying to discharge is 1040 individual tax debt, you want to have a tax attorney do a bankruptcy analysis and figure out the statutes of limitations on the debt, which 1040’s (if any) are dischargeable and when, and if there are alternatives (such as an offer in compromise, partial pay installment agreement, currently not collectible status) that accomplish the same things a bankruptcy would, without the stigma of a bankruptcy.
     
    There are a lot of people that charge ahead without knowing what is/is not dischargeable and end up with the IRS waiting for them after discharge.  Also, be mindful that the bankruptcy process favors Ch. 11 reorganization, and many trustees, courts and lawyers will push strongly for 11.  Ch. 11 doesn’t help you with the taxes because the IRS takes a super priority status in 11, i.e. they theoretically get paid 100 cents on the dollar (typically over the course of 5 years) before other creditors. 

  • What can I do if my income taxes were discharged in bankruptcy, but my IRS transcript shows that I still owe them?

    This is one of the most common mistakes that the IRS computers make.  Their systems (and their agents for that matter) rarely understand discharge of income taxes.  For that reason, the IRS may be wrong about the amount you owe and still try to aggressively collect from you anyway.  If the IRS won't listen, call a tax professional immediately.  There may be an appeal that can be done or your representative may need to get the Taxpayer's Advocate Office (TAO) involved.

  • Can taxes be discharged through bankruptcy?

    Possibly. Income taxes can be discharged, but certain criteria have to be met first to qualify. Payroll taxes can never be discharged. You still may have other options available to you.